My Mother in law's water heater died and I installed a new one for her this afternoon. However, when I disconnected the old one, there was one red wire and one black wire connected to the line from the breaker. The new heater has one black wire, one blue wire and one yellow wire. I'm a little lost. If I read the diagram right, the black and the blue wire are to be connected together to the black lead from the breaker and the yellow wire is connects to the white wire from the breaker.

Can anyone shed some light on this for me?

Thanks!